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2009-04-29 08:30:00 CEST 2009-04-29 08:30:08 CEST REGULATED INFORMATION UPM-Kymmene - Interim report (Q1 and Q3)UPM Interim Report 1 January-31 March 2009UPM-Kymmene Corporation Interim Report 29 April 2009 at 09:30 UPM Interim Report 1 January-31 March 2009 Earnings per share for the first quarter were EUR -0.30 (0.20), and excluding special items EUR -0.27 (0.19). Operating loss was EUR 95 million (profit of EUR 193 million), and excluding special items operating loss was EUR 78 million (profit of EUR 188 million). Operating cash flow was EUR 274 million (50 million). Cash preservation and cost-savings were emphasised. Key figures Q1/ Q1/ Q1-Q4/ 2009 2008 2008 Sales, EUR million 1,857 2,410 9,461 EBITDA, EUR million 1) 128 337 1,206 % of sales 6.9 14.0 12.7 Operating profit (loss), EUR -95 193 24 million excluding special items, EUR -78 188 513 million % of sales -4.2 7.8 5.4 Profit (loss) before tax, EUR -162 134 -201 million excluding special items, EUR -145 129 282 million Net profit (loss) for the -158 103 -180 period, EUR million Earnings per share, EUR -0.30 0.20 -0.35 excluding special items, EUR -0.27 0.19 0.42 Diluted earnings per share, EUR -0.30 0.20 -0.35 Return on equity, % neg. 6.2 neg. excluding special items, % neg. 5.9 3.4 Return on capital employed, % neg. 6.7 0.2 excluding special items, % neg. 6.5 4.6 Operating cash flow per 0.53 0.10 1.21 share, EUR Shareholders' equity per 11.05 12.48 11.74 share at end of period, EUR Gearing ratio at end of 72 64 71 period, % Net interest-bearing 4,139 4,107 4,321 liabilities at end of period, EUR million Capital employed at end of 10,501 10,772 11,193 period, EUR million Capital expenditure, EUR 67 137 551 million Personnel at end of period 24,039 25,841 24,983 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets, excluding the share of results of associated companies and joint ventures, and special items. Results Q1 of 2009 compared with Q1 of 2008 Sales for the first quarter of 2009 were EUR 1,857 million, 23% lower than the EUR 2,410 million in the first quarter of 2008. Sales decreased due to lower deliveries across most of UPM's business areas. The operating loss was EUR 95 million, -5.1% of sales (profit of EUR 193 million, 8.0% of sales). The operating loss excluding special items was EUR 78 million, -4.2% of sales (profit of EUR 188 million, 7.8% of sales). Operating loss includes charges net of EUR 17 million as special items. UPM sold assets related to the former Miramichi paper mill in Canada, and recorded an income of EUR 21 million. The share of the results of associated companies includes special charges of EUR 29 million. Other special charges of EUR 9 million relate to restructuring measures. Profitability declined clearly from the same period last year. The main reason for the weaker profitability was significantly lower deliveries in most of UPM's business areas. UPM responded to the decline in demand and deliveries with a flexible way of operating in all of its business areas. Through permanent cost saving measures and temporary layoffs, the company lowered its fixed costs by EUR 70 million from the same period last year. Furthermore, the Label business area is restructuring its European operations. Wood costs remained at the same high level as in the comparison period. In addition, EBITDA and operating profit excluding special items include a write down of EUR 43 million in wood inventories and reserves. Energy costs increased by approximately EUR 44 million. The average paper price in euro increased by approximately 4% from the same period last year. The average price for label materials was clearly higher. Timber and plywood prices declined materially. The change in the fair value of biological assets net of wood harvested was EUR 11 million compared with EUR 28 million a year before. The share of results of associated companies and joint ventures was EUR 53 million negative (22 million positive). The result includes special charges of EUR 29 million from Metsä-Botnia's Kaskinen pulp mill closure. The loss before tax was EUR 162 million (profit of EUR 134 million) and excluding special items the loss was EUR 145 million (profit of EUR 129 million). Interest and other finance costs, net, of EUR 58 million (49 million) include the arrangement fee of the new syndicated revolving credit facility. Exchange rate and fair value gains and losses resulted in a loss of EUR 9 million (10 million). Income taxes were EUR 4 million positive (31 million negative). The impact on taxes from special items was EUR 3 million negative (0 million). The loss for the first quarter was EUR 158 million (profit of EUR 103 million) and earnings per share were EUR -0.30 (0.20). Earnings per share excluding special items were EUR -0.27 (0.19). Operating cash flow per share was EUR 0.53 (0.10). Financing Cash flow from operating activities, before capital expenditure and financing, was EUR 274 million (50 million). Net working capital decreased by EUR 216 million during the period (increased by EUR 106 million). The gearing ratio as of 31 March 2009, was 72% (64% on 31 March 2008). Net interest-bearing liabilities at the end of the period came to EUR 4,139 million (4,107 million). UPM signed a new EUR 825 million revolving credit facility on 12 March 2009. The facility matures in 2012 and replaces the EUR 1.5 billion facility that was to mature in 2010. On 31 March 2009, UPM's cash funds and unused committed credit facilities totalled EUR 1.7 billion. Personnel In the first quarter of 2009, UPM had an average of 24,199 employees (25,971). At the beginning of the year the number of employees was 24,983, and at the end of the first quarter it was 24,039. The reduction of 944 persons is mostly attributable to ongoing restructuring. Capital expenditure During the first three months of 2009, capital expenditure was EUR 67 million, 3.6% of sales (EUR 137 million, 5.7% of sales). The largest ongoing project is a new renewable energy power plant at the Caledonian mill in Irvine, Scotland. The total investment cost is estimated to be EUR 75 million. The new power plant is scheduled to start in the second quarter of 2009. Shares In the first quarter of 2009, UPM shares worth EUR 1,503 million (2,840 million) in total were traded on the NASDAQ OMX Helsinki stock exchange. The highest quotation was EUR 9.78 in January and the lowest EUR 4.35 in March. The company's ADSs are traded on the US over-the-counter (OTC) market under a Level 1 sponsored American Depositary Receipt programme. The Annual General Meeting held on 25 March 2009 approved a proposal of the Board of Directors to authorise the Board of Directors to decide on the buy-back of not more than 51,000,000 own shares. The authorisation is valid for 18 months from the date of the decision. The Annual General Meeting of 27 March 2007 decided to authorise the Board to decide on a free issue of shares to the company itself so that the total number of shares to be issued to the company combined with the number of own shares bought back under the buy-back authorisation may not exceed 1/10 of the total number of shares of the company. In addition, the Board has the authority to decide to issue shares and special rights entitling the holder to shares of the company. The number of new shares to be issued, including shares to be obtained under special rights, shall be no more than 250,000,000. Of that, the maximum number that can be issued to the company's shareholders based on their pre-emptive rights is 250,000,000 shares and the maximum amount that can be issued deviating from the shareholders' pre-emptive rights in a directed share issue is 100,000,000 shares. The maximum number of new shares to be issued as part of the company's incentive programmes is 5,000,000. Furthermore, the Board is authorised to decide on the disposal of own shares. To date, this authorisation has not been used. These authorisations of the Annual General Meeting 2007 will remain valid for no more than three years from the date of the decision. The Meeting of 27 March 2007 also decided on granting share options in connection with the company's share-based incentive plans. In option programmes 2007A, 2007B and 2007C, the total number of share options is no more than 15,000,000, and they will entitle to subscribe for a total of no more than 15,000,000 new shares of the company. Apart from the above, the Board of Directors has no current authorisation to issue shares, convertible bonds or share options. The number of shares entered in the Trade Register on 31 March 2009 was 519,970,088. Through the issuance authorisation and share options, the number of shares may increase to a maximum of 790,970,088. At the end of the period, the company held 15,944 of its own shares, or 0.003% of the total number of shares, which have been granted under the Group's share reward scheme. These shares have been returned to the company in connection with termination of employment contracts. Dividend The Annual General Meeting of 25 March 2009 approved the Board's proposal to pay a dividend of EUR 0.40 per share for the 2008 financial year. The dividend of EUR 208 million was approved to be paid on 8 April 2009 and is included in short-term non-interest-bearing liabilities at the end of March. Company directors At the Annual General Meeting nine members were elected to the Board of Directors. Mr Matti Alahuhta, President and CEO of KONE Corporation, Mr Berndt Brunow, Board member of Oy Karl Fazer Ab, Mr Karl Grotenfelt, Chairman of the Board of Directors of Famigro Oy, Dr. Georg Holzhey, former Executive Vice President of UPM and Director of G. Haindl'sche Papierfabriken KGaA, Ms Wendy E. Lane, Chairman of the American investment firm Lane Holdings, Inc., Mr Jussi Pesonen, President and CEO of UPM, Ms Ursula Ranin, Board member of Finnair plc, Mr Veli-Matti Reinikkala, President of ABB Process Automation Division and Mr Björn Wahlroos, Chairman of the Board of Sampo plc were re-elected as members of the Board of Directors. The term of office of the members of the Board of Directors lasts until the end of the next Annual General Meeting. At the assembly meeting of the Board of Directors, Mr Björn Wahlroos was re-elected as Chairman, and Mr Berndt Brunow and Dr. Georg Holzhey were re-elected as Vice Chairmen. In addition, the Board of Directors appointed from among its members an Audit Committee with Mr Karl Grotenfelt as Chairman, and Ms Wendy E. Lane and Mr Veli-Matti Reinikkala as members. A Human Resources Committee was appointed with Mr Berndt Brunow as Chairman, and Dr. Georg Holzhey and Ms Ursula Ranin as members. Furthermore, a Nomination and Corporate Governance Committee was appointed with Mr Björn Wahlroos as Chairman, and Mr Matti Alahuhta and Mr Karl Grotenfelt as members. Litigation Certain competition authorities are continuing investigations into alleged antitrust activities with respect to various products of UPM. The authorities have granted UPM conditional full immunity with respect to certain conduct disclosed to them. UPM has settled or agreed to settle the class-action lawsuits in the US except for those filed by indirect purchasers of labelstock. The remaining litigation matters may last several years. No provisions have been made in relation to these investigations. Events after the balance sheet date The Group's management is not aware of any significant events occurring after 31 March 2009. Outlook for 2009 Economic activity in UPM's main markets continues to contract and this will have an impact on consumer demand, construction activity, and advertising expenditure in media and thus on demand for all of UPM's products. UPM curtails production to respond to the changes in demand. Pressure on product prices exists, however, due to excess market supply. UPM's paper deliveries for 2009 are forecast to be markedly lower than last year. Deliveries for the second quarter of the year are estimated to be somewhat higher than for the first quarter of 2009. Demand for self-adhesive labelstock in the main markets is estimated not to improve during the rest of the year. Demand for birch and spruce plywood is forecast to continue at current low level for the rest of the year. Cost of wood raw material will gradually be lower. For the Group wood and other raw material costs are expected to be lower than 2008, however, main impact would be during the latter part of the year. Also fixed costs are expected to be lower. Capital expenditure for 2009 is forecast to be about EUR 300 million. Business area reviews Energy Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/ 2009 2008 2008 2008 2008 2008 Sales, EUR million 136 141 129 103 105 478 EBITDA, EUR million 1) 57 76 58 34 39 207 % of sales 41.9 53.9 45.0 33.0 37.1 43.3 Share of results of -4 -11 -8 -2 -5 -26 associated companies and joint ventures, EUR million Depreciation, amortisation -2 -3 -1 -1 -1 -6 and impairment charges, EUR million Operating profit, EUR million 51 62 49 31 33 175 % of sales 37.5 44.0 38.0 30.1 31.4 36.6 Special items, EUR million - - - - - - Operating profit excl. 51 62 49 31 33 175 special items, EUR million % of sales 37.5 44.0 38.0 30.1 31.4 36.6 Electricity deliveries, 1,000 2,486 2,731 2,653 2,344 2,439 10,167 MWh 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. Q1 of 2009 compared with Q1 of 2008 The operating profit excluding special items for Energy was EUR 51 million, EUR 18 million higher than last year (33 million). Sales increased by 30% to EUR 136 million (105 million), whereof EUR 49 million was external sales (15 million). The electricity sales volume was 2.5 TWh in the quarter (2.4 TWh). Profitability improved compared with the same period last year, mainly due to the higher average electricity sales price. The average electricity sales price increased by 40% to EUR 45.2/MWh (32.3/MWh). Hydropower volume was 9% lower than last year, which increased the average cost of procuring electricity. Market review The average electricity price in the Nordic electricity exchange in the first quarter was EUR 38.2/MWh, unchanged from the same period last year (38.0/MWh). Oil and coal prices decreased significantly in the global energy markets from the comparison period. CO2 emission allowance prices decreased as well. The one year forward electricity price in the Nordic electricity exchange averaged EUR 33.8/MWh in the first quarter, 34% lower than in the same period last year (51.4/MWh). Pulp Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/ 2009 2008 2008 2008 2008 2008 Sales, EUR million 139 200 228 247 269 944 EBITDA, EUR million 1) -55 9 38 35 57 139 % of sales -39.6 4.5 16.7 14.2 21.2 14.7 Share of results of -47 -4 44 20 26 86 associated companies and joint ventures, EUR million Depreciation, amortisation -20 -73 -22 -17 -16 -128 and impairment charges, EUR million Operating profit, EUR million -122 -76 60 38 67 89 % of sales -87.8 -38.0 26.3 15.4 24.9 9.4 Special items, EUR million 2) -29 -59 - - - -59 Operating profit excl. -93 -17 60 38 67 148 special items, EUR million % of sales -66.9 -8.5 26.3 15.4 24.9 15.7 Pulp deliveries, 1,000 t 372 421 480 527 554 1,982 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) In 2009, special items of EUR 29 million relate to the associated company Metsä-Botnia's Kaskinen pulp mill closure. In 2008, special items of EUR 59 million relate to the closure of the Tervasaari pulp mill. Q1 of 2009 compared with Q1 of 2008 The operating loss excluding special items for Pulp was EUR 93 million (profit of EUR 67 million). The sales of UPM's own pulp mills decreased by 48% to EUR 139 million (269 million) and deliveries by 33% to 372,000 tonnes (554,000). Profitability weakened substantially from the previous year. The main reasons for the fall in profitability were the approximately 23% lower average pulp price and lower deliveries at the same time as wood costs remained high. The company chose to reduce wood inventories and reserves during the quarter. This resulted in higher pulp inventories for later internal use. EBITDA and operating profit excluding special items in the quarter include a wood inventory write down of EUR 28 million and a pulp inventory write down of EUR 10 million. The share of results of the associated company Metsä-Botnia was EUR 47 million negative (26 million positive). The result includes special charges of EUR 29 million from Metsä-Botnia's Kaskinen pulp mill closure. Market review In the first quarter of 2009, chemical market pulp shipments declined from the comparison period by about 9%. Despite production curtailments, pulp producer inventories remained at a high level. Global chemical pulp prices continued to decline. The average softwood pulp (NBSK) market price in euro terms, at EUR 455/tonne, was 23% lower than in the same period last year (EUR 588/tonne). The average hardwood pulp (BHKP) market price in euro terms also decreased by 23% from last year, to EUR 409/tonne (EUR 529/tonne). Forest and timber Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/ 2009 2008 2008 2008 2008 2008 Sales, EUR million 385 419 475 518 508 1,920 EBITDA, EUR million 1) -15 -52 -4 4 4 -48 % of sales -3.9 -12.4 -0.8 0.8 0.8 -2.5 Change in fair value of 11 -2 4 20 28 50 biological assets and wood harvested, EUR million Share of results of 1 -1 - - 1 - associated companies and joint ventures, EUR million Depreciation, amortisation -5 -6 -36 -7 -7 -56 and impairment charges, EUR million Operating profit, EUR million -18 -63 -38 17 25 -59 % of sales -4.7 -15.0 -8.0 3.3 4.9 -3.1 Special items, EUR million 2) -10 -2 -33 - -1 -36 Operating profit excl. -8 -61 -5 17 26 -23 special items, EUR million % of sales -2.1 -14.6 -1.1 3.3 5.1 -1.2 Sawn timber deliveries, 1,000 363 421 510 628 573 2,132 m3 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) In 2009, special items of EUR 10 million relate to the sales loss of Miramichi's forestry and sawmilling operations' assets. Special items in 2008 include an impairment charge of EUR 31 million related to fixed assets of the Finnish sawmills. Q1 of 2009 compared with Q1 of 2008 The operating loss excluding special items for Forest and timber was EUR 8 million (profit of EUR 26 million). Sales declined by 24% to EUR 385 million (508 million). Sawn timber deliveries decreased by 37% to 363,000 cubic metres (573,000 cubic metres). Profitability weakened from the same period last year, mainly due to the approximately 21% lower average price of delivered timber goods and lower deliveries. Wood costs remained at a high level. The increase in the fair value of biological assets (growing trees) was EUR 21 million (41 million). The cost of wood raw material harvested from the Group's own forests was EUR 10 million (13 million). The net effect was EUR 11 million positive (28 million positive). Market review Demand for both redwood and whitewood sawn timber in Europe declined materially from last year, due to low construction activity. Weaker market balance resulted in significantly lower prices. Wood purchases in the Finnish wood market were some 50% lower than in the first quarter of 2008. In 2008 the industry prepared for prohibitive wood export duties from Russia with high wood inventories. This combined with low wood consumption slowed down market activity during the quarter. In Finland fibre wood market prices decreased as wood demand slowed down. Log market prices decreased from the previous year as well. Paper Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/ 2009 2008 2008 2008 2008 2008 Sales, EUR million 1,367 1,750 1,761 1,727 1,773 7,011 EBITDA, EUR million 1) 187 189 271 216 209 885 % of sales 13.7 10.8 15.4 12.5 11.8 12.6 Share of results of -1 1 - - - 1 associated companies and joint ventures, EUR million Depreciation, amortisation -149 -264 -388 -156 -159 -967 and impairment charges, EUR million Operating profit, EUR million 60 -126 -114 60 51 -129 % of sales 4.4 -7.2 -6.5 3.5 2.9 -1.8 Special items, EUR million 2) 23 -153 -227 - 1 -379 Operating profit excl. 37 27 113 60 50 250 special items, EUR million % of sales 2.7 1.5 6.4 3.5 2.8 3.6 Deliveries, publication 1,304 1,809 1,760 1,749 1,772 7,090 papers, 1,000 t Deliveries, fine and 724 784 863 923 981 3,551 speciality papers, 1,000 t Paper deliveries total, 1,000 t 2,028 2,593 2,623 2,672 2,753 10,641 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) In 2009, special items include an income of EUR 31 million related to the sale of the assets of the former Miramichi paper mill and charges of EUR 8 million related to restructuring measures. In 2008, special items include the goodwill impairment charge of EUR 230 million impairment charges of EUR 101 million and other restructuring costs of EUR 42 million related to the closure of the Kajaani paper mill, and other restructuring costs, net of EUR 6 million. Q1 of 2009 compared with Q1 of 2008 The operating profit excluding special items for Paper was EUR 37 million, EUR 13 million lower than a year ago (50 million). Sales were EUR 1,367 million (1,773 million). Paper deliveries decreased by 26% to 2,028,000 tonnes (2,753,000). Paper deliveries for publication papers (magazine papers and newsprint) decreased by 26% and for fine and speciality papers by 27% from the previous year. The deliveries in Europe declined less than exports from Europe as company concentrated to improve market and customer mix. The profitability weakened from the corresponding period last year due to lower deliveries. The average price for all paper deliveries when translated into euros was 4% higher. The stronger euro against the GBP impacted profitability negatively. Pulp costs were significantly lower than last year. Also, logistic costs and fixed costs decreased. In response to the weak market situation, extensive production downtime was taken during the quarter. Market review Demand for publication papers in Europe was 19% and for fine papers 20% lower than a year ago. In North America the demand for publication papers continued to decline and demand was 26% down from last year. In Asia demand for fine papers decreased likewise. The average market prices in euro area increased but decreased in GBP area when translated into euros due to 20% devaluation of GBP. In Europe the average market prices in euros increased by about 2% for magazine papers and decreased by some 3% for standard newsprint when compared with the first quarter of 2008. The average market price increased by 4% for coated fine papers and declined by 7% for uncoated fine papers from the previous year. In North America the average US dollar prices for magazine papers were 1% higher for the quarter compared to the corresponding period a year ago. In Asia market prices for fine papers decreased. Label Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/ 2009 2008 2008 2008 2008 2008 Sales, EUR million 223 233 239 245 242 959 EBITDA, EUR million 1) 6 -1 9 15 11 34 % of sales 2.7 -0.4 3.8 6.1 4.5 3.5 Depreciation, amortisation -9 -16 -8 -7 -8 -39 and impairment charges, EUR million Operating profit, EUR million -3 -38 1 8 3 -26 % of sales -1.3 -16.3 0.4 3.3 1.2 -2.7 Special items, EUR million 2) - -28 - - - -28 Operating profit excl. -3 -10 1 8 3 2 special items, EUR million % of sales -1.3 -4.3 0.4 3.3 1.2 0.2 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) In 2008, special items of EUR 28 million relate to measures to reduce coating capacity and close two slitting terminals in Europe. Q1 of 2009 compared with Q1 of 2008 The operating loss excluding special items for Label was EUR 3 million (profit of EUR 3 million). Sales were EUR 223 million (242 million). Profitability weakened due to lower sales volumes. Delivery volumes of self-adhesive label materials declined by 10-20% depending on the region driven by lower economic activity. Average prices converted to euros increased by about 9% which fully compensated for the higher raw material costs. Fixed costs were lower. In 2008, UPM Raflatac opened two new labelstock factories; one in Dixon, USA in January, and another in Wroclaw, Poland in November. The start-up of both factories has proceeded according to the plan. Restructuring of European operations, which was announced in the fourth quarter of 2008, has proceeded as planned. The first capacity closures have already taken place and the programme will be completed by end of the year 2009. Market review Demand for self-adhesive label materials has declined in all markets as demand for consumer products has slowed down. In Europe and North America demand has stabilised at the current low level during the first three months of the year, and in Asia, it has shown some first signs of partial recovery. Plywood Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/ 2009 2008 2008 2008 2008 2008 Sales, EUR million 75 102 121 150 157 530 EBITDA, EUR million 1) -23 -5 3 22 26 46 % of sales -30.7 -4.9 2.5 14.7 16.6 8.7 Depreciation, amortisation -5 -5 -5 -6 -5 -21 and impairment charges, EUR million Operating profit, EUR million -29 -10 -2 19 21 28 % of sales -38.7 -9.8 -1.7 12.7 13.4 5.3 Special items, EUR million 2) -1 - - 3 - 3 Operating profit excl. -28 -10 -2 16 21 25 special items, EUR million % of sales -37.3 -9.8 -1.7 10.7 13.4 4.7 Deliveries, plywood, 1,000 m3 133 160 188 227 231 806 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) Special items in 2008 include reversals of provisions related to the disposed Kuopio plywood mill. Q1 of 2009 compared with Q1 of 2008 The operating loss excluding special items for Plywood was EUR 28 million (profit of EUR 21 million). Sales decreased by EUR 82 million to EUR 75 million as plywood deliveries declined by 42% to 133,000 m3. Profitability for Plywood declined from last year due to significantly lower delivery volumes and lower prices. The cost of logs remained at a record high level. EBITDA and operating profit excluding special items in the quarter include a wood inventory write down of EUR 15 million. Weak market demand led to extensive production downtime at all mills. The Heinola mill was temporarily shut down from 19 January 2009 onwards. Decisions to move the Lahti operations to other mills and temporarily shut down the Kaukas mill were announced after the period on 14 April 2009. Market review In Europe, plywood demand declined substantially from the first quarter of 2008 due to record low construction activity and demand for engineered end products in transportation and other industrial end uses. Declining demand in Europe has left much idle capacity and increased need to reduce inventories in all parts of the supply chain. The market price levels have been under pressure. Other operations Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/ 2009 2008 2008 2008 2008 2008 Sales, EUR million 34 34 52 66 48 200 EBITDA, EUR million 1) -29 -38 3 -13 -9 -57 % of sales -85.3 -111.8 5.8 -19.7 -18.8 -28.5 Share of results of -2 -1 -1 3 - 1 associated companies and joint ventures, EUR million Depreciation, amortisation -3 2 -2 -5 -3 -8 and impairment charges, EUR million Operating profit, EUR million -34 -35 4 -16 -7 -54 % of sales -100.0 -102.9 7.7 -24.2 -14.6 -27.0 Special items, EUR million 2) - 2 4 -1 5 10 Operating profit excl. -34 -37 0 -15 -12 -64 special items, EUR million % of sales -100.0 -108.8 0.0 -22.7 -25.0 -32.0 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) In 2008, special items include an adjustment of EUR 5 million to sales of disposals of 2007 and other restructuring income net of EUR 5 million. Other operations include development units (the wood plastic composite unit UPM ProFi, RFID tags and biofuels), logistic services and corporate administration. Q1 of 2009 compared with Q1 of 2008 Excluding special items, the operating loss for Other operations was EUR 34 million (loss of EUR 12 million). Sales amounted to EUR 34 million (48 million). The development units incurred an operating loss. Helsinki, 29 April 2009 UPM-Kymmene Corporation Board of Directors Financial information This Interim Report is unaudited Consolidated income statement EUR million Q1/ Q1/ Q1-Q4/ 2009 2008 2008 Sales 1,857 2,410 9,461 Other operating income 17 40 83 Costs and expenses -1,734 -2,108 -8,407 Change in fair value of 11 28 50 biological assets and wood harvested Share of results of -53 22 62 associated companies and joint ventures Depreciation, amortisation -193 -199 -1,225 and impairment charges Operating profit (loss) -95 193 24 Gains on available-for-sale - - 2 investments, net Exchange rate and fair value -9 -10 -25 gains and losses Interest and other finance -58 -49 -202 costs, net Profit (loss) before tax -162 134 -201 Income taxes 4 -31 21 Profit (loss) for the period -158 103 -180 Attributable to: Equity holders of the parent -158 102 -179 company Minority interest - 1 -1 -158 103 -180 Earnings per share for profit (loss) attributable to the equity holders of the parent company Basic earnings per share, EUR -0.30 0.20 -0.35 Diluted earnings per share, EUR -0.30 0.20 -0.35 Statement of comprehensive income EUR million Q1/ Q1/Q1-Q4/ 2009 2008 2008 Profit (loss) for the period -158 103 -180 Other comprehensive income for the period, after tax: Translation differences 29 -130 -206 Net investment hedge -8 35 56 Cash flow hedges -18 20 -33 Available-for-sale investments - - - Share of other comprehensive 4 -18 1 income of associated companies Other comprehensive income 7 -93 -182 for the period, net of tax Total comprehensive income -151 10 -362 for the period Total comprehensive income attributable to: Equity holders of the parent -151 9 -361 company Minority interest - 1 -1 -151 10 -362 Condensed consolidated balance sheet EUR million 31.03.2009 31.03.2008 31.12.2008 ASSETS Non-current assets Goodwill 934 1,163 933 Other intangible assets 409 411 403 Property, plant and equipment 5,584 6,048 5,688 Biological assets 1,144 1,121 1,133 Investments in associated 1,219 1,178 1,263 companies and joint ventures Deferred tax assets 260 252 258 Other non-current assets 726 442 697 10,276 10,615 10,375 Current assets Inventories 1,198 1,420 1,354 Trade and other receivables 1,447 1,791 1,710 Cash and cash equivalents 197 98 330 2,842 3,309 3,394 Assets classified as held for sale - - 12 Total assets 13,118 13,924 13,781 EQUITY AND LIABILITIES Equity attributable to equity holders of the parent company Share capital 890 890 890 Fair value and other reserves -151 -53 -165 Reserve for invested 1,145 1,067 1,145 non-restricted equity Retained earnings 3,864 4,492 4,236 5,748 6,396 6,106 Minority interest 14 13 14 Total equity 5,762 6,409 6,120 Non-current liabilities Deferred tax liabilities 612 748 658 Non-current interest-bearing 4,189 3,368 4,534 liabilities Other non-current liabilities 605 594 624 5,406 4,710 5,816 Current liabilities Current interest-bearing liabilities 550 995 537 Trade and other payables 1,400 1,810 1,291 1,950 2,805 1,828 Liabilities related to assets - - 17 classified as held for sale Total liabilities 7,356 7,515 7,661 Total equity and liabilities 13,118 13,924 13,781 Condensed consolidated cash flow statement EUR million Q1/ Q1/ Q1-Q4/ 2009 2008 2008 Cash flow from operating activities Profit (loss) for the period -158 103 -180 Adjustments 289 152 1,232 Change in working capital 216 -106 -132 Cash generated from operations 347 149 920 Finance costs, net -59 -59 -216 Income taxes paid -14 -40 -76 Net cash generated from 274 50 628 operating activities Cash flow from investing activities Acquisitions and share purchases - -5 -19 Purchases of intangible and -78 -175 -558 tangible assets Asset sales and other 14 9 45 investing cash flow Net cash used in investing -64 -171 -532 activities Cash flow from financing activities Change in loans and other -342 -17 305 financial items Share options exercised - - 78 Dividends paid - - -384 Net cash used in financing -342 -17 -1 activities Change in cash and cash -132 -138 95 equivalents Cash and cash equivalents at 330 237 237 the beginning of period Foreign exchange effect on cash -1 -1 -2 Change in cash and cash -132 -138 95 equivalents Cash and cash equivalents at 197 98 330 end of period Operating cash flow per 0.53 0.10 1.21 share, EUR Consolidated statement of changes in equity Attributable to equity holders of the parent company EUR million Share Treasury Translation capital shares differences Balance at 1 January 2008 890 - -158 Changes in equity for 2008 Share-based compensation, net of tax - - - Dividend paid - - - Business combinations - - - Total comprehensive income - - -109 for the period Balance at 31 March 2008 890 - -267 Balance at 1 January 2009 890 - -295 Changes in equity for 2009 Share-based compensation, net of tax - - - Dividend paid - - - Business combinations - - - Total comprehensive income - - 31 for the period Balance at 31 March 2009 890 - -264 EUR million Fair value Reserve for Retained and other invested earnings reserves non- restricted equity Balance at 1 January 2008 193 1,067 4,778 Changes in equity for 2008 Share-based compensation, net of tax 1 - - Dividend paid - - -384 Business combinations - - - Total comprehensive income 20 - 98 for the period Balance at 31 March 2008 214 1,067 4,492 Balance at 1 January 2009 130 1,145 4,236 Changes in equity for 2009 Share-based compensation, net of tax 1 - - Dividend paid - - -208 Business combinations - - - Total comprehensive income -18 - -164 for the period Balance at 31 March 2009 113 1,145 3,864 EUR million Total Minority Total interest equity Balance at 1 January 2008 6,770 13 6,783 Changes in equity for 2008 Share-based compensation, net of tax 1 - 1 Dividend paid -384 - -384 Business combinations - -1 -1 Total comprehensive income 9 1 10 for the period Balance at 31 March 2008 6,396 13 6,409 Balance at 1 January 2009 6,106 14 6,120 Changes in equity for 2009 Share-based compensation, net of tax 1 - 1 Dividend paid -208 - -208 Business combinations - - - Total comprehensive income -151 - -151 for the period Balance at 31 March 2009 5,748 14 5,762 Quarterly information EUR million Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/ 2009 2008 2008 2008 2008 2008 Sales 1,857 2,315 2,358 2,378 2,410 9,461 Other operating income 17 9 23 11 40 83 Costs and expenses -1,734 -2,227 -1,998 -2,074 -2,108 -8,407 Change in fair value of 11 -2 4 20 28 50 biological assets and wood harvested Share of results of -53 -16 35 21 22 62 associated companies and joint ventures Depreciation, amortisation -193 -365 -462 -199 -199 -1,225 and impairment charges Operating profit (loss) -95 -286 -40 157 193 24 Gains on available-for-sale - - - 2 - 2 investments, net Exchange rate and fair value -9 -14 - -1 -10 -25 gains and losses Interest and other finance -58 -60 -50 -43 -49 -202 costs, net Profit (loss) before tax -162 -360 -90 115 134 -201 Income taxes 4 74 3 -25 -31 21 Profit (loss) for the period -158 -286 -87 90 103 -180 Attributable to: Equity holders of the parent -158 -287 -86 92 102 -179 company Minority interest - 1 -1 -2 1 -1 -158 -286 -87 90 103 -180 Basic earnings per share, EUR -0.30 -0.56 -0.17 0.18 0.20 -0.35 Diluted earnings per share, EUR -0.30 -0.56 -0.17 0.18 0.20 -0.35 Earnings per share, excluding -0.27 -0.19 0.25 0.17 0.19 0.42 special items, EUR Average number of shares 519,954 519,979 519,999 517,622 512,581 517,545 basic (1,000) Average number of shares 519,954 519,979 519,999 516,791 513,412 517,545 diluted (1,000) Special items in operating -17 -240 -256 2 5 -489 profit (loss) Operating profit (loss), -78 -46 216 155 188 513 excl. special items % of sales -4.2 -2.0 9.2 6.5 7.8 5.4 Special items before tax -17 -240 -250 2 5 -483 Profit (loss) before tax, -145 -120 160 113 129 282 excl. special items % of sales -7.8 -5.2 6.8 4.8 5.4 3.0 Return on equity, excl. neg. neg. 7.8 5.4 5.9 3.4 special items, % Return on capital employed, neg. neg. 7.7 5.7 6.5 4.6 excl. special items, % EBITDA 128 178 378 313 337 1,206 % of sales 6.9 7.7 16.0 13.2 14.0 12.7 Share of results of associated companies and joint ventures Energy -4 -11 -8 -2 -5 -26 Pulp -47 -4 44 20 26 86 Forest and timber 1 -1 - - 1 - Paper -1 1 - - - 1 Other operations -2 -1 -1 3 - 1 Total -53 -16 35 21 22 62 Deliveries Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/ 2009 2008 2008 2008 2008 2008 Electricity, 1,000 MWh 2,486 2,731 2,653 2,344 2,439 10,167 Pulp, 1,000 t 372 421 480 527 554 1,982 Sawn timber, 1,000 m3 363 421 510 628 573 2,132 Publication papers, 1,000 t 1,304 1,809 1,760 1,749 1,772 7,090 Fine and speciality papers, 724 784 863 923 981 3,551 1,000 t Paper deliveries total, 1,000 t 2,028 2,593 2,623 2,672 2,753 10,641 Plywood, 1,000 m3 133 160 188 227 231 806 Quarterly segment information EUR million Q1/ Q4/ Q3/ Q2/ 2009 2008 2008 2008 Sales by segment Energy 136 141 129 103 Pulp 139 200 228 247 Forest and timber 385 419 475 518 Paper 1,367 1,750 1,761 1,727 Label 223 233 239 245 Plywood 75 102 121 150 Other operations 34 34 52 66 Internal sales -502 -564 -647 -678 Sales, total 1,857 2,315 2,358 2,378 External sales Energy 49 57 45 20 Pulp 10 6 17 18 Forest and timber 152 199 197 240 Paper 1,327 1,701 1,699 1,657 Label 222 233 238 244 Plywood 72 94 111 139 Other operations 25 25 51 60 External sales, total 1,857 2,315 2,358 2,378 Internal sales Energy 87 84 84 83 Pulp 129 194 211 229 Forest and timber 233 220 278 278 Paper 40 49 62 70 Label 1 - 1 1 Plywood 3 8 10 11 Other operations 9 9 1 6 Internal sales, total 502 564 647 678 EBITDA by segment Energy 57 76 58 34 Pulp -55 9 38 35 Forest and timber -15 -52 -4 4 Paper 187 189 271 216 Label 6 -1 9 15 Plywood -23 -5 3 22 Other operations -29 -38 3 -13 EBITDA, total 128 178 378 313 Operating profit (loss) by segment Energy 51 62 49 31 Pulp -122 -76 60 38 Forest and timber -18 -63 -38 17 Paper 60 -126 -114 60 Label -3 -38 1 8 Plywood -29 -10 -2 19 Other operations -34 -35 4 -16 Operating profit (loss), total -95 -286 -40 157 % of sales -5.1 -12.4 -1.7 6.6 Special items by segment Energy - - - - Pulp -29 -59 - - Forest and timber -10 -2 -33 - Paper 23 -153 -227 - Label - -28 - - Plywood -1 - - 3 Other operations - 2 4 -1 Special items, total -17 -240 -256 2 Operating profit (loss) excl.special items by segment Energy 51 62 49 31 Pulp -93 -17 60 38 Forest and timber -8 -61 -5 17 Paper 37 27 113 60 Label -3 -10 1 8 Plywood -28 -10 -2 16 Other operations -34 -37 - -15 Operating profit (loss) excl. -78 -46 216 155 special items, total % of sales -4.2 -2.0 9.2 6.5 EUR million Q1/2008 Q1-Q4/2008 Sales by segment Energy 105 478 Pulp 269 944 Forest and timber 508 1,920 Paper 1,773 7,011 Label 242 959 Plywood 157 530 Other operations 48 200 Internal sales -692 -2,581 Sales, total 2,410 9,461 External sales Energy 15 137 Pulp 22 63 Forest and timber 233 869 Paper 1,704 6,761 Label 241 956 Plywood 147 491 Other operations 48 184 External sales, total 2,410 9,461 Internal sales Energy 90 341 Pulp 247 881 Forest and timber 275 1,051 Paper 69 250 Label 1 3 Plywood 10 39 Other operations - 16 Internal sales, total 692 2,581 EBITDA by segment Energy 39 207 Pulp 57 139 Forest and timber 4 -48 Paper 209 885 Label 11 34 Plywood 26 46 Other operations -9 -57 EBITDA, total 337 1,206 Operating profit (loss) by segment Energy 33 175 Pulp 67 89 Forest and timber 25 -59 Paper 51 -129 Label 3 -26 Plywood 21 28 Other operations -7 -54 Operating profit (loss), 193 24 total % of sales 8.0 0.3 Special items by segment Energy - - Pulp - -59 Forest and timber -1 -36 Paper 1 -379 Label - -28 Plywood - 3 Other operations 5 10 Special items, total 5 -489 Operating profit (loss) excl.special items by segment Energy 33 175 Pulp 67 148 Forest and timber 26 -23 Paper 50 250 Label 3 2 Plywood 21 25 Other operations -12 -64 Operating profit (loss) excl. 188 513 special items, total % of sales 7.8 5.4 Changes in property, plant and equipment EUR million Q1/ Q1/ Q1-Q4/ 2009 2008 2008 Book value at beginning of 5,688 6,179 6,179 period Capital expenditure 65 128 471 Decreases -11 -2 -24 Depreciation -178 -183 -748 Impairment charges - - -182 Translation difference and 20 -74 -8 other changes Book value at end of period 5,584 6,048 5,688 Commitments and contingencies EUR million 31.03.2009 31.03.2008 31.12.2008 Own commitments Mortgages 1) 760 89 787 On behalf of associated companies and joint ventures Guarantees for loans 9 10 10 On behalf of others Other guarantees 2 3 2 Other own commitments Leasing commitments for the 20 26 17 next 12 months Leasing commitments for 51 86 56 subsequent periods Other commitments 68 66 62 1) Mortgages relate mainly to giving mandatory security for borrowing from Finnish pension insurance companies. Capital commitments EUR million Completion Total cost By 31.12.2008 Rebuild of debarking plant, October 2010 30 1 Pietarsaari Waste water treatment plant, September 2010 19 - Blandin New bioboiler, Caledonian May 2009 75 57 Efficiency improvement, September 2009 9 - Chudovo Gas usage reduction, Schwedt August 2009 9 2 EUR million Q1/ After 2009 31.03. 2009 Rebuild of debarking plant, 1 28 Pietarsaari Waste water treatment plant, - 19 Blandin New bioboiler, Caledonian 10 8 Efficiency improvement, 1 8 Chudovo Gas usage reduction, Schwedt - 7 Notional amounts of derivative financial instruments EUR million 31.03.2009 31.03.2008 31.12.2008 Currency derivatives Forward contracts 3,824 5,964 4,598 Options, bought - 121 - Options, written - 174 - Swaps 505 511 508 Interest rate derivatives Forward contracts 2,718 4,639 2,668 Swaps 2,809 2,148 2,833 Other derivatives Forward contracts 161 18 172 Options, bought 78 - - Options, written 78 - 78 Swaps 8 2 8 Related party (associated companies and joint ventures) transactions and balances EUR million Q1/ Q1/Q1-Q4/ 2009 2008 2008 Sales to associated 27 26 138 companies Purchases from associated 103 127 592 companies Non-current receivables at 2 - - end of period Trade and other receivables 22 26 37 at end of period Trade and other payables at 30 25 27 end of period Basis of preparation This unaudited financial report has been prepared in accordance with the accounting policies set out in International Accounting Standard 34 on Interim Financial Reporting and in the Group's Consolidated Financial Statements for 2008. Income tax expense is recognised based on the best estimate of the weighted average annual income tax rate expected for the full financial year. The Group has adopted the following standard: IAS 1 (Revised) Presentation of Financial Statements became effective 1 January 2009. The revised standard prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity') in the statement of changes in equity, requiring ‘non-owner changes in equity' to be presented separately from owner changes in equity. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. Following the adoption of the revised standard the Group will present two separate statements (a separate income statement followed by a statement of comprehensive income). Calculation of key indicators Return on equity, %: (Profit before tax - income taxes) / Total equity (average) x 100 Return on capital employed, %: (Profit before tax + interest expenses and other financial expenses) / (Total equity + interest-bearing liabilities (average)) x 100 Earnings per share: Profit for the period attributable to equity holders of the parent company / Adjusted average number of shares during the period excluding treasury shares Key exchange rates for 31.03.2009 31.12.2008 30.09.2008 the euro at end of period USD 1.3308 1.3917 1.4303 CAD 1.6685 1.6998 1.4961 JPY 131.17 126.14 150.47 GBP 0.9308 0.9525 0.7903 SEK 10.9400 10.8700 9.7943 Key exchange rates for 30.06.2008 31.03.2008 the euro at end of period USD 1.5764 1.5812 CAD 1.5942 1.6226 JPY 166.44 157.37 GBP 0.7923 0.7958 SEK 9.4703 9.3970 It should be noted that certain statements herein, which are not historical facts, including, without limitation, those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or similar expressions, are forward-looking statements. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein including the availability and cost of production inputs, continued success of product development, acceptance of new products or services by the Group's targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Group's patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Group's products and the pricing pressures thereto, financial condition of the customers and the competitors of the Group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group's principal geographic markets or fluctuations in exchange and interest rates. For more detailed information about risk factors, see pages 71-73 of the company's annual report 2008. UPM-Kymmene Corporation Pirkko Harrela Executive Vice President, Corporate Communications UPM, Corporate Communications Media Desk, tel. +358 40 588 3284 communications@upm-kymmene.com DISTRIBUTION NASDAQ OMX Helsinki Ltd Main media www.upm-kymmene.com |
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